The Values of Insurance

Valuing artworks for any purpose can be a headache.

Firstly, there is what might be termed intrinsic value – many hours can be enjoyed arguing on an intellectual basis, but there is no universally applicable magic formula. Then there is market value; so long as sales have already occurred to establish a maker’s place in the market. Then there is something talked about only occasionally; insurance value. Insurance value depends on the kind of policy covering the work and the claimant’s ability to persuade the insurance company’s loss adjuster of the value of the work lost, damaged or stolen. This is not an easy matter. It is especially difficult if the claimant is an art student or has never sold work sufficiently to have established a marketplace to the satisfaction of the loss adjuster. At least with an average market value taken from works already sold, an artist has something concrete to put to the insurance company whose immediate instincts would be to pay for the cost of the materials and leave it at that.
Most insurance loss adjusters’ experiences tend to be with motor or house insurance; not valuing artworks. The tale of the artist who lost one part of a triptych only for the loss adjuster to explain that all was well because two paintings remained illustrates the problems. Very few insurance companies write policies with art in mind. Those that are available tend to be cannibalised from household policies. The public sector exhibitors are usually covered by what is called public authority indemnity arrangements, often referred to as Crown Indemnity or something similar. This operates so that when work is damaged or destroyed in a public sector showing or when located in public sector property, the value of the work would be negotiated by administrative officers who would pay but up to an agreed value of around £2,000. Any damage above this would be referred to the relevant Department of State who would employ a loss adjuster – again, however, someone whose experience would probably be in motor or house insurance rather than art with no proven market value. It is very difficult to achieve proper insurance cover or to make a persuasive claim in the absence of an established market value.

Take, for example, a student whose work is destroyed in his/her studio/home. Assuming there is some form of insurance cover, what should the student say to the loss adjuster? What factors should be considered in trying to work out a value for the work? How is the student going to make out a credible case for fair and reasonable payment?

These are some of the steps: first, think about how much time it would take to ‘re-paint’ or replace the piece with one that would serve the purposes for which the first one was intended – as course work or as a piece for a degree show; second, work out how much money could realistically be earned freelancing or working in any endeavour – typing/washing dishes/temping – for someone in their spare time, weekends, evenings and vacs, a sum can be arrived at from the hours/income that could be earned if the time weren’t spent ‘re-painting’ the lost piece for the course; add in the cost of materials; finally, get the tutor to write a letter supporting the contention that the lost piece was needed for the course; the amount of time (X hours) the tutor would have expected the student to spend on its making (inception through to completion); the course is full-time and the student would not be able to re-make the work during the course; the course needs such a piece and the student would have to do it in ‘spare time’; no valuation could possibly be put on a student piece even if an independent valuer had seen it, because student work is not for sale but is reserved for selection and assessment by the college and can only be valued if the college allows it to be sold after inclusion in the final degree show; the economic loss is of income-earning time and not of a valuable market place commodity.

Most insurers and loss adjusters would not have faced such situations before. They should be treated gently. If the college wrote instead of or in addition to the student, it would give greater authority to the arguments. Ideally, students or professional artists should take out insurance specifically to cover their portfolios. Preferably this should be a policy with an agreed price for every single piece of work, and with a clause stating explicitly that they are reasonable values. There are several questions to ask when finding a policy: does it cover the portfolio as a whole? does it refer to specific works, each individually valued? does it cover the studio, the gallery wall, in transit, in college? Even if artists or students have an insurance policy, it is very important to have written evidence stating who is responsible for the physical safety of the work – the gallery, the college, the transporter – and where and when does their responsibility begin and end.

Exhibition agreements and gallery contracts should normally include all such details in their written terms and conditions; ideally, insurance value should be settled by agreement between the exhibitor/organiser or dealer but will not necessarily be the same amount as previous selling prices or current asking prices.

In choosing insurance, artists should try to steer clear of policies which contain what is called an ‘average clause’. For example: an artist insures a portfolio for £1,000. There is a small fire in the studio and one canvas is destroyed. The insurance company sends the loss adjuster along. The loss adjuster values the individual piece at £100 pounds. All seems well, but the loss adjuster also values the insured portfolio at £2,000. If there is an average clause in the contract then the company will say that it was 50% underinsured and therefore they will only pay out 50% of the claim, in this case £50.00 Beware.

Unfortunately, until the day when some enlightened individual, company or organisation persuades a Lloyds underwriter to construct a policy specifically for artworks (an expensive business), negotiations after accidents and loss will continue to be tricky and time consuming. This does not mean, however, that students or professional artists should accept that the insurance value of work is merely the materials that went into making it – nor that the marketplace is the only measure of its economic value. The asking price is not necessarily the selling price – as most artists and buyers well understand.

The Artlaw Copyright Handbook is now available, write to AM for details.

© Henry Lydiate and James Odling-Smee 1992



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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.